The Australian parent of Orange County’s No. 2 surfwear company Billabong USA is looking to go public on the Australian Stock Exchange in an offering that could raise as much as $240 million.
Billabong International Chief Executive Matthew Perrin, 28, wouldn’t comment on an IPO but said employees, athletes and retailers could expect to “partake in our future,” according to Australian newspaper reports last week.
Paul Naude, president of Billabong USA, which accounts for about a third of the company’s overall business, wouldn’t confirm or deny the report saying “it is speculative.” But his company is preparing to make a major announcement Wednesday. The Irvine-based unit is second in revenue only to Huntington Beach’s Quiksilver Inc. among surfwear manufacturers in OC
It remains to be seen whether Billabong shares also might trade on a U.S. exchange. In June, the Australian Stock Exchange and other global exchanges entered talks with the New York Stock Exchange about linking their trading systems.
Officials at Australian investment bank Macquarie Equity Capital Markets said they are looking into whether there is enough investor support there for an offering from 27-year-old Billabong International.
Kitchen Start-Up
Aussie Gordon Merchant, 56, owns a 50% stake in Billabong and co-founded the company in 1973 with his former wife, Rena. The two launched the business by sewing boardshorts on their kitchen table and have grown the operation to a projected $200 million in sales for this year.
The company doesn’t have a pressing need for capital, and Merchant may be looking to cash out part of his holdings for personal reasons, the Sydney Morning Herald reported last week.
Two Australian brokerages, Ord Minnett and JB Were, are considering underwriting a possible Billabong offering.
Key to any Billabong offering is Gary Pemberton, the outgoing chairman of Qantas Airways Ltd. He’s taken a big stake in Billabong following the sale of Rena Merchant’s 49% stake 18 months ago.
Pemberton, who is expected to become Billabong’s chairman in the event of an offering, has a record of profitable performance at Qantas.
Pemberton’s background also includes a stint as the president of the Sydney Organising Committee for the Olympic Games. But he resigned four years ago for personal reasons.
In June 1999, Gordan Merchant took over the U.S. operations after his longtime licensee, Bob Hurley, left to create his own surfwear label, Hurley International in Costa Mesa. (Hurley’s business has since grown to an estimated $28 million in yearly sales.)
Since Hurley’s departure, Billabong USA has had to build up its staff,the bulk of which departed with Hurley. Under Naude, Billabong USA has launched a girls division and has grown its U.S. arm from an estimated $60 million in annual sales in 1998 to more than $80 million today.
Growing Sector
The growing surfwear industry has come a long way since Billabong’s humble beginnings. The sector is packed with big players such as Hurley, Quiksilver, O’Neill Inc. in Irvine, Rip Curl in Carlsbad, Irvine’s Rusty Apparel, and Ocean Pacific in Irvine.
According to the Surf Industry Manufacturers Association, the number of active surfers has grown from 1.1 million in 1992 to nearly 2 million this year. Moreover, surfwear has moved into the mainstream of fashion as many companies have taken their labels to department stores and chain stores, such as those of industry leader Pacific Sunwear of California Inc., Anaheim.
In recent years, new competitors such as Costa Mesa-based Volcom have blurred industry lines by catering to the entire action-sports industry that includes skateboarding and snowboarding.
Quiksilver recently detailed plans to acquire Quiksilver International Pty. Ltd., the Australian owner of the global trademark rights to the Quiksilver brand. Quiksilver, whose 1999 earnings were $27 million on sales of $443.7 million, trades on the New York Stock Exchange. n
